Tax our tech and we’ll blacklist your bubbly
“UNACCEPTABLE”, harrumphed France’s finance minister. Worthy of a “pugnacious” response, thundered a colleague. The object of this Gallic ire was the Trump administration’s threat this week to impose 100% tariffs on some of France’s tastiest exports, from cheese to champagne, in response to its government’s planned digital-sales tax.
Corporate tax has become a major source of transatlantic tension since various European countries began to cook up levies to capture more revenue from the likes of Google and Facebook, whose effective European tax rates often look suspiciously low—sometimes a mere percent or two. France has gone furthest, with a 3% levy on sales that will be backdated to the start of 2019. Britain’s version, levying 2%, is set to kick in next April. America’s Treasury calls such taxes “discriminatory”.
Both sides accept there is an underlying problem. The IMF reckons governments lose at least $500bn a year from multinationals shifting profits to tax havens. This siphoning has become a gush with the growth of tech and other businesses whose assets are mostly intangible, and thus easier to move.
Most large economies—including America—accept that the treaty-based international corporate-tax system, which dates back to the 1920s, needs a refit. But negotiations, led by the OECD, have dragged on for six...